JAKARTA (TheInsiderStories) – Indonesian General Election results have not yet affected the Jakarta Composite Index (JCI) and the Rupiah exchange rate in the long term, although since the end of last year JCI has decreased to 5.74 percent. While Rupiah is not able to move from Rp14,000 level, said a senior analyst on Monday (05/20).
Analysts saw JCI and Rupiah could rebound, even though it will face pressure in the whole of May 2019 and amid the global economic slowdown. On Monday (05/20), the Rupiah stagnant at 14,450, after last week had strengthened against the US dollar.
While the performance of the Composite Stock Price Index returned to excitement at the opening of trading on Tuesday (05/21). Foreign investors returned to buying. The announcement of election results is a sentiment so that it can crawl up in the range of 5,925-5,945 with the trading frequency of around 25,939 times, it said.
There are around nine sectors engaged in the green zone, led by the property sector which rose 1.54 percent and the mining sector which rose 1.29 percent. Similarly, from the 633 shares traded, 178 of them rose, while 55 shares fell, and 400 other stocks stagnated.
Portfolio Manager-Equity PT Manulife Aset Manajemen Indonesia Andrian Tanuwijaya explained JCI and Rupiah movements were relatively more volatile before entering the first-half of 2019. In this period the local currency tends to weaken because of the dividend payment period.
Also, stock trading is relatively quiet because of mid-year Ramadhan and Eid Al-Fitr holidays. However, those factors will make the market volatile temporarily because, in the long period, Indonesia market has a potential based on its fundamental factors.
“And so far we see market fundamentals still healthy. The performance of our issuers’ expectations continues to grow positively this year, and Indonesia’s macroeconomic conditions also remain good. Therefore we believe market volatility in the short term can be an opportunity for investors to invest gradually,” Tanuwijaya said.
In domestic condition, Indonesia has passed the general election safely, and it will eliminate the sentiment of political uncertainty which had previously overshadowed the market. Bank Indonesia (BI) also has the opportunity to cut interest rates this year because the Federal Reserves is expected to hold interest rates.
“The decline in interest rates can be a signal to the market that BI has moved more pro-growth, and this has the potential to be a positive catalyst for the Indonesian financial market. These factors can attract Indonesia’ stock market and foreign investors, “he said.
Meanwhile, Pilarmas Investindo Sekuritas rates, global factors will greatly affect the movement of the JCI. This sentiment comes from the tension between China and the United States, which continues to heat up, under the threat of higher tariffs.
Besides, investors pay attention to political tension and domestic stability ahead of the final decisions of the presidential election on May 22. Therefore, this week will be a crucial week for the capital market and will be a turning point after the announcement on May 22 and passed on May 26, he added.
If in that period, the brokerage rated there were no claims against the announcement of the winner and the situation and conditions went well, next week should be a moment of strengthening the capital market.
On Tuesday, the JCI followed the sentiment by moving in green territory, up by 0.74 percent to 5,951.37, as Widodo effect continues. Reliance Sekuritas analyst Lanjar Nafi, stated that investors optimism increased as there’s certainty of presidential election victory by official.
Meanwhile, infrastructure sector only gained 0.12 percent. Widodo, the incumbent, has been boosting infrastructure in the last few years. But its no longer becoming focus due to the swelling state budget for infrastructure projects.
Widodo’ focus on infrastructure has been switched lately. It is seen from the slowdown infrastructure budget. In 2019, the infrastructure allocation budget only increased by 1.04 percent to Rp415 trillion. While in 2015 and 2017, the budget allocation jumped by 65.5 percent and 44.3 percent respectively.
Bumiputera Sekuritas Research sees that domestic market players has taken early start ahead of the Election Commission announcement.
On May 20, the JCI has increased by 1.37 percent, even though there was RP642.88 billion foreign outflows. It considered that Widodo effect has brought JCI to its gaining position.
“We feel that JCI is still able to continue its strengthening due to Widodo effect euphoria amid foreign market players who actually anticipate wait and see waiting for the action on May 22, which is feared will trigger chaos,” the research said.
Nafi also concerned the same issue. As for today, Rp643.13 billion foreign outflow recorded, ahead of Wednesday demonstration. This is also brought Rupiah against US dollar turned down by 0.17 percent to Rp14,480.
“Worries of foreign investors is still felt enough,” he said.
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